The road to financial stability requires a good understanding of the concept of financial management. Essentially, financial management enables you to have better control over your finances, and it’s also concerned with how you can use financial resources to your advantage. One of the most basic components of a good financial management strategy is the effective use of a bank account. Specifically, we’re talking about how a bank account should be managed to maximize its utility.
In this article, we are going to discuss some specific management strategies as regards bank accounts, such as maintaining minimum balance requirements, setting up automated transactions, segregating funds, and opening some sort of savings account, like a UFB Direct high-yield savings account, for example.
Maintaining Minimum Balance Requirements
Most, if not all, banks and credit unions require their account holders to keep a minimum amount of funds inside their bank accounts at any given time. This figure is referred to as the “minimum balance,” and it can vary greatly depending on the bank, the type of account, market conditions, and other relevant factors. Minimum balance requirements are made clear at the beginning of the engagement of the bank and the account holder. It’s one of the essential discussions that bank agents have with their prospective customers, and this is made clear again and again throughout the contract presentation and signing. The accompanying fees and charges are also presented to the account holder in the event that he/she does not meet the minimum balance requirement.
A lot of people fall victim to unknown bank charges because they do not familiarize themselves with the terms and conditions of the bank. That is why you have to pay close attention when opening a bank account. Be thorough in your review of the contract and take note of any minimum balance requirement duly stipulated in the contract. Try to adhere to minimum balance requirements so as to avoid having to pay hundreds, if not thousands, of dollars for unnecessary fees and charges.
Bank accounts are supposed to serve as tools that help you take better control of your financial resources and obligations. One of the many ways in which bank accounts help you do this is by allowing you to set up automated transactions. For example, you could set up a regular monthly fund transfer to your utility company so as to ensure that you’re always paying your utility bills on time. For one, this ensures that you do not get charged additional fees for late payments. But more importantly, it takes away a lot of the hassle and stress attached to budgeting and scheduling payments. Some banks even provide incentives for their account holders that use their platform for bill payments. This could be in the form of discounts, no fund transfer charges, or some other benefit.
Bank accounts also help massively segregate funds for different purposes. As you may have already known, being able to segregate funds is one of the fundamental concepts of budgeting, as it ensures that no mix-up of funds occurs. You could, for example, set up different bank accounts for different purposes. Ideally, you would want to separate funds for business and personal matters. This is to allow for better tracking of expenses, generating reports, and a more convenient accounting process. You could also mix and match the use of different types of bank accounts, such as checking and savings accounts, depending on the type of funds that you want to keep.
Bank accounts are the most basic form of investment you can have. They also tend to be the most secure as you won’t have to constantly deal with changes in value. However, the rate of return with savings accounts is, of course, going to be lower as compared to other forms of investment. But still, any amount of earnings should be considered and should be taken into account. In the end, even if the interest rates are single-digit percentages, these earnings will all add up to be quite significant.